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Semiconductor sector poised for recovery, riding on AI wave: Rakuten Trade

Semiconductor sector poised for recovery, riding on AI wave: Rakuten Trade

13 Mar 2024

The semiconductor industry is poised for recovery this year due to advancements in artificial intelligence (AI) technology, according to Rakuten Trade.

Its head of research Kenny Yee said the semiconductor industry’s performance has been sluggish over the past two years but increasing demand for AI globally will drive semiconductor demand.

“Therefore, I think global demand for semiconductors will increase and Malaysia (as one of the largest exporter of semiconductors in the world) will benefit from this spike in demand for semiconductors,” he said during Rakuten Trade’s virtual media briefing on Malaysia’s Q2 Market Outlook yesterday.

“The demand for AI will require a lot of semiconductor parts. That will increase the demand and the producers will ramp up their production. That will increase the semiconductor industry,” Yee explained.

Rakuten Trade pointed to International Data Corporation which indicated that semiconductor sales will recover by 20% in 2024. It said the ongoing AI frenzy, coupled with stabilising demand for smartphones and resilient growth in the automobile industry is expected to usher in a new wave of growth for the semiconductor industry.

Yee also mentioned that the banking, construction, and telecommunications sectors will serve as the primary drivers of the Malaysian economy throughout the year.

“To grow the economy the country needs the banks to support the economic growth,” said Yee.

Moreover, he said, numerous projects have been announced for the construction sector, with more expected soon.

“Other than government infrastructure projects, there will be private projects that will drive the construction sector,” he added.

As for the local stock market, the firm anticipates the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) to possibly touch 1,660 points by end-2024 based on 15.5 times price-to-earnings ratio (PER) premised on 16% earnings growth.

“For curiosity purposes, in the event fund flows normalise, we may even see the index breaching the 1,700 mark premised on just 16 times PER. Foreign fund inflows finally emerged albeit sluggishly,” said Yee.

He said corporate Malaysia closed 2023 on a decent note despite some refinements along the way. This led to a flat 2023 while 2024 corporate Malaysia may experience an eye-catching 16.3% jump mainly due to the low base effect, he added.

As for 2025, Yee said Rakuten Trade expects a more stable 6.7% growth for corporate Malaysia, underpinned by growth across the board.

As for the ringgit, he reckoned prevailing rates do not truly reflect the country’s improving environment.

“Hence, we believe it will strengthen going forward to between the 4.50/55 range by end-2024 on the back of the easing interest rate trend in the US/EU and improving investment climate domestically,” he explained.

Source: The Sun